The current conflict in the Middle East underscores the importance of America’s energy independence. We are stronger and better positioned for global disruptions because we have greatly expanded domestic energy production over the last fifteen years, partially thanks to the development of new production methods and new energy sources. As a result, the United States became a net energy exporter in 2019, and produced a record amount of oil last year. Even though the price of oil is set on a worldwide basis, energy supply shocks in the U.S. are much less likely thanks to our nation’s pro-production energy agenda.
Unfortunately, the previous presidential administration started playing favorites with energy sources, which risked limiting American energy independence. The Trump Administration rightly began to reverse this trend via executive order, but the Working Families Tax Cuts (WFTC) helped finish the job. It ended a series of expensive “green new deal” laws that mainly benefited wealthy Americans, and created new policies designed to greatly expand domestic energy production.
The WFTC promoted oil and gas development by requiring the federal government to hold regular lease sales on land and water under its management. It directed the Bureau of Land Management (BLM) to hold quarterly lease sales in western states over the next ten years, increased the length of drilling permits to give operators more time to get energy out of the ground, and greatly expanded the amount of land available for leasing. It also lowered the cost of leasing government land, increased carbon sequestration credits for drillers, and allowed for increased deductions for intangible drilling costs to help spur more development.
The expansion of energy development in the WFTC was not just limited to land areas: it directed the Bureau of Ocean Energy Management (BOEM) to hold at least two lease sales per year for the next 15 years in the Gulf of Mexico (America) and established a minimum amount of available acres in each lease sale. Lease sales of Alaskan waters and lands were also included in the WFTC, with minimum lease sales and acreage amounts added there.
The law heavily promoted coal production, which historically has played a key part of domestic energy production before green environmental policies discouraged its use. The WFTC directed BLM to take measures to quickly issue coal leases to qualified applicants, expand the areas available for coal production, and allow for road construction and right of way access to new coal production areas in Alaska. The bill even increased federal development of geothermal energy, requiring BLM to hold annual lease sales in this area at fair royalty rates.
To better protect America in the face of future oil shocks, WFTC appropriated over $200 million for maintenance of the Strategic Oil Reserve, as well as $660 million to fill up the reserve. It encouraged growth in nuclear energy production by expanding production tax credits and loan guarantees for the industry. Even the hydropower industry benefited from the WFTC, thanks to extensions of production and investment tax credits for the industry.
The energy production policy changes made by the WFTC may have already had an impact. Coal, oil, and gas production have increased over the last year. It takes time for the industry to switch direction from the regressive policies of the previous administration, but we anticipate both lower energy costs and greatly increased domestic production thanks to the law. Taxpayers, and the overall economy, will greatly benefit from these energy provisions.